AYESHA RASCOE, HOST:
Many countries have strategic reserves in case of shortages or as a way to keep prices stable. The U.S. has its strategic oil reserves. China has tens of thousands of tons of frozen, raw pork. The newest reserve – bitcoin. Last week, President Trump signed an order to create a strategic reserve of cryptocurrency. To explain how this might work, we called up Zeke Faux. He’s an investigative reporter with Bloomberg and author of the book “Number Go Up, ” about the crypto industry. He joins us now. Good morning.
ZEKE FAUX: Morning.
RASCOE: Typically, these strategic reserves are commodities – oil, grain, pork. But cryptocurrencies exist in ledgers on computers. So how will a digital currency reserve work?
FAUX: What the administration officials have said the plan is, is that the U.S. already digitally holds quite a lot of bitcoin. There’s a lot of crime involving bitcoin, and it often results in the bitcoins being seized by the U.S. government. And in the past, these have been auctioned off by the U.S. Marshals Service for regular U.S. dollars, which can be used for whatever. Now the government is going to hold onto these bitcoins. The purpose of that is not entirely clear, but Donald Trump has hinted if the price goes up a lot, this could help pay off the national debt.
RASCOE: How much would – the amount of bitcoin they have now, how much is that in, like, U.S. dollars at this point?
FAUX: It’s about $20 billion. And even if you believe that the U.S. government should be gambling on the price of bitcoin, this is not nearly enough to have an impact on anything.
RASCOE: And what is the argument that this would be helpful?
FAUX: The crypto industry is really good at creating this impression that this is the future and that the U.S. government needs to get on this or will be left behind. I’ve spent years traveling the world, investigating this industry, and what I’ve found is there’s nothing there. Crypto has been around for 15 years. It’s as old as Uber. It’s as old as WhatsApp, but pretty much no one is using it for anything but financial speculation. The crypto industry is basically a giant offshore casino. Even if you believe that these are winning bets, the U.S. government has never been in the business of speculating on financial assets.
RASCOE: Just a few years ago, Trump called cryptocurrency a scam. So what changed?
FAUX: During his most recent campaign, a few dozen of the richest bitcoiners got together, and they engaged in this concerted lobbying effort to change his mind. And last July, they held a fundraiser that reportedly raised $25 million for Trump. And after that, Trump went onstage at this bitcoin conference and promised them he would deregulate the crypto industry. He’d make the U.S. the crypto capital of the planet. And that’s where he first floated this strategic reserve plan, which has been a pipe dream of bitcoin advocates for years.
RASCOE: President Trump and first lady Melania Trump, they both have their own coins. The family has its own crypto business called World Liberty Financial. Is that a conflict of interest?
FAUX: Yeah. When you’ve got the U.S. government spending its money on these assets, and you’ve got people who are in the administration investing in the assets, yeah, it’s a clear conflict of interest.
RASCOE: The Securities and Exchange Commission had been investigating the crypto industry, but under Trump, those investigations ended. What were they focused on?
FAUX: The SEC under the Biden administration – they’re basically saying that some of these cryptocurrencies count as securities, meaning things that we regulate, and that the industry had not been following the long-established rules around securities, which mandate that you have to file these detailed disclosures. There’s rules around trading. Industry has said cryptocurrencies are different. We need new rules. And right now, the Trump administration has said they agree with that position, and they’re in the process of working out these new rules, whatever they’re going to be.
RASCOE: That’s Zeke Faux. He’s an investigative reporter with Bloomberg, and his book about cryptocurrency is called “Number Go Up.” Thanks so much for joining us.
FAUX: Thank you. Transcript provided by NPR, Copyright NPR.